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Thermo Fisher (TMO) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Thermo Fisher Scientific Inc. TMO is slated to report first-quarter 2019 results, before the opening bell on Apr 24. In the last reported quarter, the company delivered a positive earnings surprise of 1.88%. Moreover, its key metrics surpassed estimates in the trailing four quarters, recording an average of 3.13%.

Which Way Are Estimates Trending?

The Zacks Consensus Estimate for first-quarter earnings per share is pegged at $2.74, reflecting a year-over-year improvement of 9.6% from the year-ago reported figure.

The same for revenues stands at $6.02 billion, suggesting an improvement of 2.9% over the prior-year reported quarter.

Let’s see how things are shaping up prior to this announcement.

Key Catalysts

With respect to the company’s analytical instruments business, higher global demand, sturdy Thermo Scientific brand, substantial impact from the electron microscopy business, and robust volume expansion and productivity is expected to drive this line of business in the to-be-reported quarter.
The Zacks Consensus Estimate for Analytical Instruments revenues is pegged at $1.27 billion, suggesting an improvement of 1.2% from the year-ago reported figure.

Now turning to the life science solutions business, continued strength in the company’s Ion Torrent line of Next-Gen sequences with the GeneStudio S5 series of benchtop instruments and the introduction of Invitrogen EVOS M5000 digital microscope for cell imaging is likely to contribute to the company’s top line in the to-be-reported quarter.

For 2019, the company estimates revenues to range between $24.88 billion and $25.28 billion, resulting in a reported revenue growth of 2-4%.

The company stands to benefit from its successful growth strategy through the launch of innovative products and building scale in high-growth in emerging markets. It is also likely to gain by bolstering customer value proposition.

Other Factors Likely to Influence Q1

The company’s focus on bolstering growth through implementation of strategies and consolidation of product offerings is encouraging. These initiatives might in turn, help it report impressive results during the first quarter.

The company’s aim of expanding capabilities across the rapidly-growing Asia-Pacific belt and the emerging markets is also likely to enhance quarterly results. Outside the United States, the company’s largest market lies in China and it has taken steps to sustain momentum in this market. We expect the company’s commercial infrastructure, in particular, to drive strong growth in the soon-to-be-reported quarter.

Moreover, expected improvement in the applied markets such as environmental and food safeties apart from life science is likely to drive first quarter results.

Turning to Pharma and Biotech, consistent strength in all the businesses serving this end market along with the wide range and depth of capabilities provided to its customer base might boost the company’s performance in the first quarter.

On the back of prudent growth strategy, effective capital deployment, strong analytical instruments business and product portfolio expansion, the company estimates adjusted EPS for 2019 to range between $12 and $12.20 per share, suggesting growth of 8-10% year over year.

Thermo Fisher Scientific Inc. Price and EPS Surprise


Thermo Fisher Scientific Inc. Price and EPS Surprise | Thermo Fisher Scientific Inc. Quote

However, we are anxious about Thermo Fisher facing a foreign exchange headwind pertaining to 2019 revenues and adjusted EPS. With regards to forex, the company projects year-over-year headwind of about $400 million of revenues or 1.6% and 21 cents per share of adjusted EPS or 1.9% in 2019. The major portion of this headwind is expected in the first half of the year.

Moreover, a hostile macroeconomic condition remains a headwind. Further, stiff competition continues to pose challenges to the stock’s value.

Here’s What the Quantitative Model Predicts:

Our proven Zacks model clearly shows that a company with a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chances of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Thermo Fisher has a Zacks Rank #2 and an Earnings ESP of +0.49%, the combination makes us reasonably confident of an earnings beat.

Other Stocks Worth a Look

Here are a few other stocks worth considering from the broader medical space as these too have the right combination of elements to beat on earnings this time around.

Laboratory Corporation of America Holdings LH has an Earnings ESP of +0.36% and a Zacks Rank #3.

Teleflex Incorporated TFX has an Earnings ESP of +0.96% and a Zacks Rank #3.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.13% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
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